For the first time in biopharma history, IPO values have crested the stalwart year of 2000, with companies raising a total of $7.44 billion globally by mid-October. (See Biopharma IPO values by year, below.)

With more than two months left in 2018 and about 20 pending IPOs waiting in the wings, the 64 IPOs completed so far this year, mostly on U.S. exchanges, have brought in 6 percent more than the $6.96 billion raised during what many industry leaders have referred to as the benchmark or bubble year for IPOs.

Nevertheless, average IPO performance this year remains somewhat flat and two companies with pending IPOs lowered their expectations on Wednesday.

The comparisons across years include all IPOs worldwide, including two whoppers completed on the Hong Kong Stock Exchange (HKEX) this year: Beijing-based Beigene Ltd. raising $903 million in August, and Hangzhou, China-based Ascletis Pharma Inc. raising $397.5 million in July. While new listing rules on HKEX earlier this year opened the doors for innovative startups, removing the amounts of those two Chinese IPOs from the total still leaves 2018 only about $824 million behind the year 2000 – an amount that was easily raised within the last two months of each of the last two years.

In other words, the HKEX IPOs may not even be needed to make 2018 the best year on record for IPO values.

The last year to come close to rising above the top value was 2014 when $6.5 billion was raised, although the 84 IPOs completed did surpass the previous record of 83 completed in 2000. Follow-on offerings currently rank 2018 as the third best year on record having raised $26.74 billion so far, behind $26.87 billion and $43.6 billion for 2017 and 2015, respectively. At 213 follow-ons done this year, they are just a few behind last year's record of 216.

While both the Nasdaq Biotechnology and BioWorld stock indexes have plummeted over the last two weeks, during that same time South San Francisco-based Allogene Therapeutics Inc. raised the highest amount, $324 million, for a U.S. IPO in 2018. (See indexes, below.) The company is working on genetically engineered allogeneic T-cell therapies for cancer, including UCART-19 for relapsed or refractory B-cell precursor acute lymphoblastic leukemia. Not only is the IPO the highest amount raised for this year, but it is the third highest amount raised for a biopharma IPO since BioWorld began tracking them in 1999, falling behind the $549.1 billion raised by Talecris Biotherapeutics Inc. in 2009 and the $362.25 million raised by Axovant Sciences Ltd. in 2015. (See BioWorld, Oct. 12, 2018.)

During a conference-call review of biotech fundamentals Monday, Oppenheimer analyst Hartaj Singh said investors have asked when the window for IPOs and secondary offerings might close.

"We've been accruing data on this," he said, "but generally speaking, when you have an IPO and secondary window that stays open for a long time, the sector performance tends to lag after you hit a peak."

The overall performance of this year's IPOs shows they are relatively flat, or down by about 1 percent on average as a group. Separated, 17 are trading above their IPO price, including three that have more than doubled. Liquidia Technologies Inc., of Research Triangle Park, N.C., (NASDAQ:LQDA) rose 162 percent from its $11 IPO price in July to $28.84 on Tuesday; Solid Biosciences LLC, of Cambridge, Mass., (NASDAQ:SLDB) climbed from $16 in January to $35.73, a jump of 123 percent; and Allakos Inc., of San Carlos, Calif., (NASDAQ:ALLK) has risen 108 percent from $18 in July to $37.40.

Those top performers are offset, however, by 35 others that are trading at or below their IPO price, including Redwood City, Calif.-based Menlo Therapeutics Inc. (NASDAQ:MNLO) and New York-based Eyenovia Inc. (NASDAQ:EYEN), both of which closed Tuesday 62 percent below their $17 and $10 January IPO prices. Genprex Inc., of Austin, Texas, (NASDAQ:GNPX) closed Tuesday at $1.83, and is the lowest performer tracked by BioWorld this year, trading 63 percent below its $5 IPO price.

'A weird time'

BioWorld figures indicate 2018 is the second highest money year for combined IPO and follow-on financings, with $49.7 billion raised in 2015 and $34.2 billion in 2018, followed by $32.1 billion in 2017, $23.2 billion in 2014, and $21.7 billion in 2000. The year 2016 ranks sixth at $21.12 billion, which shows a sharp drop-off from the year before. None of the other years come anywhere close to these figures.

"This is a weird time," Singh said, "because nobody would argue that the biotech sector is hitting a high like it did in 2015, after which the IPO and secondary window closed for a while. The sector is definitely underrated, yet the IPO and secondary window continues to stay open. I think we're probably good for a few more months."

Pending IPOs expected to launch by the end of this month include Deer Park, Ill.-based Eton Pharmaceuticals Inc., Framingham, Mass.-based Alzheon Inc., Cambridge, Mass.-based Logicbio Therapeutics Inc. and Malvern, Pa.-based Phasebio Pharmaceuticals Inc., which combined could add another $240 million to 2018's IPO figures. Three others filed for IPOs earlier in October, including New York-based Hoth Therapeutics Inc., Bridgewater, N.J.-based Osmotica Pharmaceuticals plc and Jerusalem-based Gamida Cell Ltd.

The latter two reduced their expectations on Wednesday, with Gamida Cell setting a price range of $13 to $15 for each of 3.57 million shares that could at best raise $53.6 million, down from the $69 million expected in the original filing. Osmotica essentially cut in half its IPO price. It originally sought $124.5 million at the midpoint of a $14 to $16 price range for each of 8.3 million shares. It reduced that price to $7 on Wednesday and now expects to raise $58.1 million.

Brian Abrahams, an analyst for RBC Capital Markets LLC, pointed out in a research note that over the past three years, "biotech stocks have tended to respond somewhat variably to market corrections but do not typically perform worse."

His firm's analysis indicated that both the XBI and IBB indices bounced back similar to the S&P following two separate downturns earlier this year. He suggested near-term earnings, rising interest rates, the upcoming election and concerns about drug pricing all play a role in sector performance.

"During this market correction, investors may look again toward companies with concrete revenue streams relatively insulated from the broader economy," Abrahams said, "and fewer potential 'binary' catalysts in a risk-off environment, and we see a good possibility that the market volatility will perpetuate the shift toward certain larger-cap biotechs."

Of the 64 IPOs completed in 2018, 53 were on U.S. exchanges, not including IPOs of foreign companies offering American Depositary Shares. Of those 53, one is no longer trading. Armo Biosciences Inc., of Redwood City, Calif., which raised $128 million in January, was acquired in June by Eli Lilly and Co. for $1.6 billion.

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